Investor Presentation - MyState Limited€¦ · DAVID HARRADINE FY18 FULL YEAR INVESTOR...

INVESTOR

PRESENTATION

FULL YEAR FY2018

17 August 2018

AGENDA

FY18 INVESTOR PRESENTATION

1. Highlights & strategy

Melos Sulicich

Managing Director & CEO

2. Financial results

David Harradine

Chief Financial Officer

3. Strategy & outlook

Melos Sulicich

Managing Director & CEO

FY18 FULL YEAR INVESTOR PRESENTATION | 2

HIGHLIGHTS &

STRATEGY

MELOS SULICICH

Key highlights

Results



KEY HIGHLIGHTS

Growth across key financial metrics and underlying performance drivers

Growing contribution from digital channels with increased customer adoption and advocacy

Continued momentum in bank balance sheet and FUM growth and soundly capitalised for

future growth

High customer advocacy, disciplined strategy execution and increasing

customer uptake of digital are underpinning MyState’s performance


Total income:

$126.3m

Net interest income:

$90.8m

Net profit after tax:

$31.5m

Earnings per share:

34.97 cps

Fully franked dividend:

28.75 cps 1

Return on average equity: 10.1%

Cost to income:

64.0%

Total capital ratio:

13.47% 2

Home loan book:

$4.4b 1.2x system

Funds under management:

$1.15b

KEY METRICS AND PERFORMANCE DRIVERS

Change on FY17 results except where otherwise stated

+1.4%

-190bps

+6.9%

+3.1%

+5.9%

+18bps

+4.6% +0.93cps

Increased full year

dividend of 28.75cps

and final dividend

steady at 14.5cps

fully franked

Solid

performance and

growth across all

key metrics

1. Final dividend of 14.5cps payable to shareholders on the register at the record date of 24 August 2018

2. 11.51% CET1 (FY17: 11.28%)

+9bps +0.25cps

FINANCIAL

RESULTS

DAVID HARRADINE FY18 FULL YEAR INVESTOR PRESENTATION | 6

Results summary Credit profile Tasmanian economy

Performance Funding Shareholder returns

Loan book Wealth


IMPROVING OPERATING LEVERAGE DELIVERING GROWTH

FY18 FY17 Change

(v FY17)

Total operating income ($m) 126.3 124.6 +1.4%

Operating expenses (excl. BDD)

($m) 80.9 82.2 -1.5%

Net Profit after tax ($m) 31.5 30.1 +4.6%

Earnings per share (cps) 34.97 34.04 +2.7%

Net interest margin (%) 1.89 1.93 -4bps

Cost to income ratio (%) 64.0 65.9 -190bps

Total capital ratio (%) 1 13.47 13.29 +18bps

Return on average equity (%) 10.1 10.0 +9bps

Return on tangible equity (%) 13.7 13.4 +28bps

Dividend – fully franked (cps) 2 28.75 28.50 +0.25cps

Dividend payout ratio (%) 83 84 -1.0%

Credit performance –

30 day arrears (%) 0.47 0.51 -4bps

Momentum in banking and

wealth with home loan book

growing +2x system in 2HFY18

and wealth FUM and FUA

growing strongly

Revenue growth

and cost

containment

delivered positive

jaws and a lower

cost to income ratio

1. 11.51% CET1 (FY17: 11.28%)

2. Final dividend of 14.5cps payable to shareholders on the register at the record date of 24 August 2018


1.93% 1.89%

0.19%

0.01% 0.02% 0.02%

0.21% 0.07%

0.02%

1.50%

1.70%

1.90%

2.10%

2.30%

FY17 Asset price Origination

costs

Asset mix Funding

price

Funding mix FY18

MARGIN COMPRESSION IN COMPETITIVE ENVIRONMENT

Origination costs Increase Decrease

Significant increase in BBSW during

2H18 impacted funding costs

Net interest margin down -4bp on pcp

Lending market remains highly

competitive

NIM waterfall

2.13% 1.93% 1.94%

1.84% 1.89%

FY16 FY17 1H18 2H18 FY18

NIM trend

1.50

1.60

1.70

1.80

1.90

2.00

2.10

2.20

Jul

2017

Aug

2017

Sep

2017

Oct

2017

Nov

2017

Dec

2017

Jan

2018

Feb

2018

Mar

2018

Apr

2018

May

2018

Jun

2018

BB

SW

(%

)

BBSW

BBSW 1M BBSW 3M


CONTINUED DISCIPLINED COST MANAGEMENT

Operating costs declined -1.5% below pcp

Continued focus on re-shaping the cost base to enable investment in customer acquisition, marketing

and digital capability

Administration costs managed well below pcp

Depreciation and amortisation increased on pcp as higher levels of investment in technology began to

be amortised

$82.16

$80.90

$0.10 $0.13 $0.16 $0.23

$0.80

$2.48

$0.11 $0.09

78

79

80

81

82

83

84

FY17 Payment

system

Personnel Technology Marketing Depn & Amort. Administration

and other

Occupancy Governance FY18

$ M

illio

ns

Operating expenditure

-1.5% growth


$30.1

$31.5

$2.70

$1.78

$1.27 $1.38

$1.37

$0.24

$1.37

$25.0

$26.0

$27.0

$28.0

$29.0

$30.0

$31.0

$32.0

$33.0

$34.0

FY17 Net profit

after tax

Net interest

income

Other income Banking non

interest income

Wealth income Operating

expenditure

Net bad and

doubtful debts

Tax expense FY18 Net profit

after tax

$ M

illio

ns

4.6% growth

NPAT UNDERPINNED BY NII GROWTH AND WEALTH

Net profit before tax growth of 6.5% and NPAT growth of 4.6%

Strong NII growth despite continued competition in lower risk, lower LVR lending

Wealth growth across all business lines

Operating expenditure managed below prior year; one-off benefits also assisted

High quality growth leading to low bad debt outcomes

NPAT waterfall


STRONG 2H LENDING GROWTH

Loan book grew +2x system during 2HFY18

Margin management remains key focus

Emphasis on maintaining quality lending

growth amidst vigorous competition

Growth targeted to Australian eastern seaboard;

focus on lower LVR loans with high asset quality

$3,663 $4,076 $4,358

$68 $66 $64

$50 $63 $72

$71 $63 $55

90%

92%

94%

96%

98%

100%

FY16 FY17 FY18

Total book – composition ($m)

Housing Loans Personal Loans

Business / Agri / Commercial Overdrafts

$3,853 $4,269 $4,550

Geographic home loan book spread

1.42

1.68

0.79 1.00

1.79

0.88

1.19

0.46 0.65

1.11

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

$1.8

$2.0

FY16 FY17 1H18 2H18 FY18

$ B

illio

n

Home loan book – applications and settlements

Applications Settlements

+11% +7%

TAS

45.5%

VIC

15.6%

NSW

21.4%

QLD

14.1%

NT

0.1%

WA

1.7%

SA

0.9%

Lower concentration Higher concentration


CONTINUED HIGH CREDIT QUALITY

Impairments remain at historic lows

30 and 90 day arrears well below peers and stable

AASB 9 to be implemented July 2018 with

expected increases in provisioning

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

Jun

-16

Sep

-16

Dec-

16

Mar-

17

Jun

-17

Sep

-17

Dec-

17

Mar-

18

Jun

-18

30+ Days S & P Arrears Data

(Majors and Regionals one month behind)

Group SPIN Majors SPIN Regionals

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

Jun

-16

Sep

-16

Dec-

16

Mar-

17

Jun

-17

Sep

-17

Dec-

17

Mar-

18

Jun

-18

90+ Days S & P Arrears Data

(Majors and Regionals one month behind)

Group SPIN Majors SPIN Regionals

2.51

3.05

3.51

0.45

0.42

0.39

0.32

0.30

0.26

0.39

0.31

0.20

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

FY16 FY17 FY18

$ B

illio

ns

Home loan book LVR profile

>90% LVR

85%-90% LVR

80%-85% LVR

<80% LVR

Year on year

growth

-17%

+15%

$3.66

$4.36 $4.08


1,318 1,461 1,550

1,397 1,527

1,717

FY16 FY17 FY18

Customer deposits ($m)

Customer at call deposits Customer deposits at term

$2,715 $2,988 $3,267

IMPROVED FUNDING MIX

Stable funding mix enhanced by growth

in customer deposits

Customer deposit growth supported by

introduction of eSaver and Everyday

transaction accounts

Programmatic RMBS issuance continues

to be well supported by broad investor-

base

Moody’s Baa1/P2 stable investment grade

rating

66.9% 65.7% 68.0%

14.1% 13.2% 8.2%

19.0% 21.2% 23.8%

FY16 FY17 FY18

Funding mix

Customer deposits Wholesale funding Securitisation

+10% +9%


11.28% 11.51%

2.01%

0.13% 1.39%

1.74%

1.96%

1.51%

1.46% 0.08% 0.02%

FY17 Capital

initiatives

Securitised

assets

Profit Dividends paid Secured

mortgage

lending

Capitalised

intangibles

Other asset

growth

FY18

WELL CAPITALISED TO SUPPORT GROWTH

Robust capital position supported by organic capital generation

Capital base underpinning growth and investment in digital

Well positioned to meet regulatory changes

Tier 1

Tier 2

13.29% 13.47%

Total capital movements


9.59 9.79 10.36

4.81 3.76 4.70

3.07 3.19

3.45

FY16 FY17 FY18

Operating income ($m)

Funds Management* Trustees Financial Planning

1,008 1,089 1,153

740 778 809

FY16 FY17 FY18

Funds under management Funds under advice

GROWTH IN WEALTH BUSINESS

Wealth revenue growth +10.6% on pcp with

solid performance across all business lines

Trustee revenue +25% on pcp benefiting from

sustained focus on will writing

FUM growth of $64m +5.9%

FUA growth of $31m +4.0%

Income fund strategy and investment focused

on the growing income needs of retirees

Investment planned to grow wealth business

$16.74 $17.48 $18.52

Funds under management and funds

under advice ($m)

+6%

* including funds management mortgage fees


MOMENTUM IN THE TASMANIAN ECONOMY

Economic data sourced from ABS, CoreLogic and Tourism Tasmania

Tasmanian economy experienced positive start to

the year, with majority of indicators supporting

economic growth.

State Final Demand reached an all-time high of

$8.2bn in the March 2018 quarter, underpinned

by a year of consistent growth in household

consumption.

Tasmanian retail sales grew 4.6% in the year to

June 2018 compared to the national average of

3.1%, supported by tourism growth.

300,400 international visitors came to Tasmania in

the year to March 2018, a 20% increase on the

previous year and the highest number of

international visitors to Tasmania in a given year.

Hobart leads the nation in housing price growth

with average dwelling values increasing 11.5% in

the year to 30 June 2018.

Tasmanian exports grew significantly, increasing

33% over the year to June 2018, above the

national average of 8%.


Consistent dividend returns to investors

100th percentile TSR compared to ASX300 Banks in

FY13, 14, 15 and 16. 90th percentile in FY17.

High yielding fully franked dividend

CONSISTENT RETURNS TO SHAREHOLDERS

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

(1 year) (2 year) (3 year) (4 year) (5 year)

FY17 FY16 FY15 FY14 FY13

Perc

en

tile

(%

)

TSR comparison

Percentile - ASX300 Banks Percentile - ASX300 Financials

84 84

80

84 83

FY14 FY15 FY16 FY17 FY18

Dividend payout ratio

Dividends (cps)

STRATEGY &

OUTLOOK

MELOS SULICICH FY18 FULL YEAR INVESTOR PRESENTATION | 18

Sector overview Achievements

Strategic overview Platform for

continued growth


System credit growth still slowing

Housing market cooling nationally

Lending market continues to be highly competitive

Funding costs remain elevated

Royal Commission

Productivity Commission Review

Competitive landscape still unbalanced:

1. Funding cost differentials

2. Risk weighted asset and capital differentials

3. Macroprudential regulation skewing competition and

profitability in the sector

4. Lack of transparency in vertical integration of mortgage

brokers

5. Disproportionate impact of regulatory burden on smaller

banks

6. Non ADIs benefiting from macro prudential interventions

Industry

dynamics

Regulatory

dynamics

$

SECTOR OVERVIEW


Our PURPOSE To help people achieve their dreams

Our VISION We want to make a genuine difference to our customers

and communities every day

The WORLD is changing The needs and expectations of customers are changing

and technology is opening opportunities to attract and

serve new customer segments across Australia

At MyState, we know that our future success will be

founded on digital innovation and evolving the way

we think and operate so that we put customers at the

centre of everything we do

Our GOALS are to be

Our MISSION To make financial services simple and trustworthy

DELIVERING ON OUR STRATEGIC PRIORITIES

Simpler, more relevant, accessible for

our customers and easier to “use”

Evermore digitally enabled so that

we can attract the target

customers we are seeking

More deeply community connected

Seen by our shareholders as being

agile with a strong focus on

growth, margins and cost

management


Note: not all of the budgetary enablers for how MyState will look and feel in 2021 are fully captured within current strategic forecast.

* All statistics compare FY18 with FY17 unless otherwise stated

BUILDING A DIGITAL, SCALABLE BUSINESS *


PLATFORM FOR CONTINUED GROWTH

What we’ve achieved

What we’re working on

Deposit and loan

book growth

• Continued growth above

system

Customer enhancements

• MyExcellence program

• Continued focus on

customer improvement

initiatives including

continuous cycle of

platform improvements

Digital

• Faster customer onboarding

• Digital mortgage origination

• Focus on digital deposit

acquisition

Costs

• Targeted branch closures

• Productivity benefits

accruing

Digital

transformation

• Increase in customer NPS to +27

• Introduced eSaver and Everyday

transaction accounts and Basic

Home Loan

Marketing

• Build out marketing analytics

and CRM capabilities

• Brand building + refresh

Robust capital

position

• Moody’s Baa1/P2

stable investment

rating

Wealth

• Investment in Wealth,

with a focus on systems

and capability

We are modernising our business and putting customers

at the centre of everything we do


GLOSSARY

1H: First half of financial year

2H: Second half of financial year

ADI: Authorised deposit-taking institution

APRA: Australian Prudential Regulation Authority

Avg: Average

ASX: Australian Securities Exchange

BBSW: Bank Bill Swap Rate

BDD: Bad & Doubtful Debt Expense

bps: basis points

CAGR: Compounded annual growth rate

CET1: Common Equity Tier 1

cps: Cents per share

CTI: Cost-to-income ratio

DRP: Dividend reinvestment plan

EPS: Earnings per share

FY: Financial year

HY: Half year

IO: Interest only

IRB: Internal ratings-based

Jaws: relationship between income and expense growth

LVR: Loan to valuation ratio

MYS: MyState Ltd

MSB: MyState Bank Limited

NII: Net Interest Income

NIM: Net Interest Margin

NPAT: Net Profit after Tax

NPBT: Net Profit before Tax

RBA: Reserve Bank of Australia

RMBS: Residential mortgage-backed security

ROE: Return on equity

SPIN: Standard and Poor’s Performance Index

S&P: Standard and Poor’s

TD: Term deposit


DISCLAIMER

Summary Information

This Presentation contains summary information about MyState and its activities current as at

the date of this Presentation. The information is subject to change without notice and does

not purport to be complete or comprehensive. It does not purport to summarise all

information that an investor should consider when making an investment decision. It should

be read in conjunction with MyState's other periodic and continuous disclosure

announcements lodged with the Australian Securities Exchange, which are available at

www.asx.com.au.

Not Financial Product Advice

This Presentation is for information purposes only and is not financial product advice or a

recommendation to acquire shares. It has been prepared without taking into account any

investor’s objectives, financial position, situation or needs. Therefore, before making an

investment decision, investors should consider the appropriateness of the information in this

Presentation and have regard to their own objectives, financial situation and needs. Investors

should seek such financial, legal or tax advice as they deem necessary or consider

appropriate. MyState is not licensed to provide financial product advice in relation to the offer

of shares. Cooling off rights do not apply to the acquisition of the shares.

Financial Information

All information in this Presentation is in Australian dollars ($) unless stated otherwise. A

number of figures, amounts, percentages, estimates, calculations of value and fractions in this

presentation are subject to the effect of rounding. Accordingly, the actual calculation of these

figures may differ from the figures set out in this presentation and totals may vary slightly

due to rounding. All references to financial years (FY) appearing in this Presentation are to the

financial years ended on 30 June of the indicated year.

Past Performance

Past performance information, including past share price information, given in this

Presentation is given for illustrative purposes only and should not be relied upon as (and is

not) an indication of future performance.

Future Performance

This Presentation may contain “forward-looking” statements including statements

regarding MyState's intent, belief or current expectations with respect to their business

operations, market conditions, results of operations, financial conditions, and risk

management practices. Forward-looking statements can generally be identified by the

use of forward-looking words such as “anticipated”, “expected”, "aim", "predict",

“projections”, “guidance”, “forecast”, “estimates”, “could”, “may”, “target”, “consider”,

“will” and other similar expressions. Indications of, and guidance on, future earnings,

financial performance, and financial position are also forward looking statements .

Forward looking statements, opinions and estimates are based on assumptions and

contingencies which are subject to certain risks, uncertainties and change without

notice, as are statements about market and industry trends, which are based on

interpretations of current market conditions. Forward-looking statements including

projections, indications or guidance on future earnings or financial position and

estimates are provided as a general guide only and should not be relied upon as an

indication or guarantee of future performance. Should one or more of the risks or

uncertainties materialise, or should underlying assumptions prove incorrect, there can

be no assurance that actual outcomes will not differ materially from these statements.

To the fullest extent permitted by law, MyState and its directors, officers, employees,

advisers, agents and intermediaries disclaim any obligation or undertaking to release

any updates or revisions to the information to reflect any change in expectations or

assumptions.

Investment Risk

An investment in securities in MyState is subject to investment and other known and

unknown risks, some of which are beyond the control of MyState, including possible

loss of income or principal invested. MyState does not guarantee any particular rate of

return or the performance of MyState. Investors should have regard to the risk factors

outlined in this Presentation when making their investment decision.

Not an Offer

This Presentation is not an offer or an invitation to acquire shares in MyState or any

other financial products and is not a prospectus, product disclosure statement or other

offering document under Australian law or any other law. It is for information purposes

only.

Investor Presentation - MyState Limited€¦ · DAVID HARRADINE FY18 FULL YEAR INVESTOR...

Documents

Transcript of Investor Presentation - MyState Limited€¦ · DAVID HARRADINE FY18 FULL YEAR INVESTOR...